"As the economy starts to throw curve balls, you never know what's around
the corner," Jason Arbuck, Cassels Brock & Blackwell LLP
TORONTO, Sept. 29 /CNW/ - When bad storms are imminent, you hope for the
best and prepare for the worst. Unfortunately, this doesn't apply to most
owners, CFOs, senior executives and directors in the retail industry. In fact,
many are blind to how quickly their company can falter during a tough economy.
That's according to Jason Arbuck, partner, Cassels Brock Financial
"As good as managers often are, they can be blinded to some of the
troubles or financial challenges and the significance of them," Mr. Arbuck
explained. The different stages of a company are showcased in a solvency
curve, which includes the following stages: Healthy; Early Stage Trouble; Late
Stage Trouble; Insolvent; Bankrupt; and, Failed.
In fact, once a company starts sliding from the 'healthy' phase - "each
stage moves with increased pace and the options become reduced," Mr. Arbuck
That's why companies should react as quickly as possible when it comes to
challenges - such as economic slowdowns, HR issues and rising costs. Companies
need to be very honest with themselves as to what is not working internally.
Alternatively, they should engage a third party consultant to assess any
Here, Mr. Arbuck outlines the top 5 tools to consider putting in place
before your company finds itself in a tight spot:
1. Secured Debt: Shareholders can put money into the company as secured
debt. This puts them in the drivers' seat in tough times. In fact,
this can be set up before any money is put into the company - in
contemplation of loans. The earlier, the better.
2. Limited Liabilities: If you have more than one business, don't have
them all within the same legal entity. Create holding companies for
different businesses to insulate the good from the bad during tough
3. Shareholders' Agreement: A business partnership is like a marriage
and a shareholders' agreement is the pre-nup. Don't wait for tough
times to address this issue or you'll end up with a 'free for all' as
well as expensive disputes and litigation.
4. Leases: If your company co-owns real estate and retail outlets, make
sure the real estate holdings are separate. Create lease agreements -
even if you own both entities - this will protect your rights as a
landlord which can give you much needed control and leverage if your
retail outlets fail.
5. Document related party arrangements: This works, for example, where
your company owns both a supplier of goods and a purchaser of goods.
Another example is where you hold valuable trade marks in a legal
entity separate from your operating company. If different elements of
your business are held in different legal entities, be sure that the
relationships between these various entities are properly documented
with a view to providing you with greater leverage and control in
tough times. "The minute there is insolvency - you'll be challenged
on what you think you own unless it's documented," Mr. Arbuck noted.
"It's important to put in place all the tools you can while your company
is in good shape because many of these options are not available to you once
you are in a tight spot," he advised.
Jason Arbuck, as a partner in the Financial Services Group at Cassels
Brock, specializes in general business law, with an emphasis on corporate
finance matters, including banking, commercial lending, insolvency and the
purchase and sale of businesses.
About Cassels Brock
Cassels Brock & Blackwell LLP (www.casselsbrock.com) is a full-service law
firm with more than 200 lawyers working in its Toronto office. The firm
provides legal advice to clients including entrepreneurs, mid-market
enterprises and multinational corporations.
For further information:
For further information: To interview Jason Arbuck, please contact:
firstname.lastname@example.org or (416) 860-6889; Teresa Donia, iAMBIC
Communications, (905) 508-5550 or email@example.com